In June the Chancellor George Osborne confirmed the government planned to begin selling down its 79% stake in RBS as early as this month, admitting that the sale would go ahead even if the bank’s shares had not recovered to 500p – the price the government paid per share in 2008 when it bailed the lender out to the tune of £45.5bn.
The bank’s current share price is around 342p following its half year results last week which reported a loss of £153m in the first six months of the year due to litigation costs. Net profits meanwhile rose to £293m for the three months to June.
But this afternoon UK Financial Investments (UKFI) advised the Chancellor it would be appropriate to conduct the first sale of the government’s shareholding in RBS.
A spokesman from HM Treasury said: "UK Financial Investments advised the Chancellor it would be appropriate to conduct the first sale of the government’s shareholding in the Royal Bank of Scotland. The Chancellor agrees with that advice and has authorised the process to begin.
"The government set out its objectives for its shareholdings in the banks in the Chancellor’s annual Mansion House speech in June 2013 – getting the best value for the taxpayer, maximising support for the economy and restoring them to private ownership – and as set out in that address, the government will only conclude a sale if these objectives are met.
"In his Mansion House speech in June this year, the Chancellor announced his intention to start returning RBS to the private sector in the coming months, following advice from the Governor of the Bank of England."
A statement from UKFI published today confirmed that it intends to dispose of approximately 5.2% of The Royal Bank of Scotland Group by way of a placing to institutional investors.
Fionn Travers-Smith, spokesman for Move Your Money, suggested institutional investors were likely to be offered up to £2.5bn worth of shares initially but warned: "Flogging off the RBS shares at a massive loss to casino City traders is not just a travesty, it’s a dereliction of duty from the Chancellor, George Osborne.
"There is no evidence that returning RBS to the private sector will have any material benefit for the UK taxpayer whatsoever, and the public has been completely excluded from the debate about what should be done with our stake in RBS.
"Osborne talks about RBS serving the working people of Britain, but the only way that will happen is when we convert the bank into one that serves the public interest, not flog it off on the cheap to the people who caused the crisis. We are being robbed of our dues from a bank we already own."
In June Mark Carney, governor of the Bank of England, published a letter in support of Osborne’s decision to begin returning RBS ownership to the market. He said a staged sell-off "would promote financial stability" and benefit the wider economy.
